,TESTBANK for Government and Not-for-Profit
Accounting Concepts and Practices, 8th Edition
by Michael H. Granof
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, Chapter 1
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
1. The objective of a typical government or not-for-profit entity includes goals
that are difficult to quantify
2. A government’s budget may be backed by the force of law.
3. Governments have no need for an accounting system.
4. A government’s constituants rely on general purpose financial statements for
a considerable amount of information about their government.
5. Governments and not-for-profit entities may never engage in business-type
activities.
6. Lenders use the financial statements of governments and not-for-profit
entities just as they would those of businesses, that is, to help assess the
borrower’s credit-worthiness.
7. Financial statements, no matter how prepared, do not directly affect the
economic worth of an entity.
8. The Federal Accounting Standards Advisory Board’s standards do not apply
to the federal Department of the Treasury.
9. Sarbanes-Oxley was passed in 2002 to enhance the independence of the
GASB.
10. The Governmental Accounting Standards Board establishes generally
accepted accounting principles for all state and local governments and all
not-for-profit entities.
Granof_8E_TestBank_ch01 Page 1
,ANSWERS TO TRUE/FALSE QUESTIONS (CHAPTER 1)
1. T
2. T
3. F
4. T
5. F
6. T
7. T
8. F
9. T
10. F
Granof_8E_TestBank_ch01 Page 2
,MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes governments from businesses is
a. The need to generate revenues equal to or more than
expenditures/expenses.
b. The importance of the budget in the governing process.
c. The need to provide goods or services.
d. The correlation between revenues generated and demand for goods or
services.
2. A primary characteristic that distinguishes government from not-for-profits is
a. The need to generate revenues equal to or more than
expenditures/expenses.
b. The ability to levy taxes.
c. The need to provide goods or services.
d. The correlation between revenues generated and demand for goods or
services.
3. Which of the following characteristics distinguishes a government or not-for-
profit entity from a business?
a. There is always a direct link between revenues generated and
expenditures/expenses incurred.
b. Capital assets are used to produce revenues and save costs.
c. Revenues are always indicative of demand for goods and services.
d. The mission of the entity may include goals other than maximizing
profit.
4. The most significant financial document provided by a government is the
a. Balance sheet.
b. Operating statement.
c. Operating budget.
d. Cash flow statement.
5. Which of the following statements is true?
a. Governments may engage in activities like activities engaged in by for-
profit entities.
b. There are a small number of different types of governments.
c. All governments engage in the same activities.
d. Managers may have a long-term focus and thereby sacrifice the short-
term liquidity of the entity.
Granof_8E_TestBank_ch01 Page 3
,6. Which of the following activities is NOT an activity in which a government
might engage?
a. Selling electric power.
b. Operating a golf course.
c. Operating a bookstore.
d. All of the above are activities that might be carried out by a
government.
7. In which of the following activities is a not-for-profit entity least likely to
engage?
a. Providing educational services.
b. Providing health-care services.
c. Providing for terrorism defense.
d. Retail sales of cookies
8. Which of the following can be affected by GAAP?
a. Legal ability to issue bonds.
b. Ability to balance the budget.
c. Amount reported as employee pension plan contributions.
d. Claims and judgments settled.
9. Which of the following characteristics is unique to governments?
a. The ability to have activities financed with tax-exempt debt.
b. The power to impose fees.
c. The ability to issue tax-exempt debt.
d. The ability to have activities financed by Federal grants.
10. To obtain a comprehensive understanding of a government’s fiscal health, a
financial analyst should obtain an understanding of which of the following?
a. All the resources owned by the government.
b. All the resources that may be summoned by the government.
c. Demographic data about the residents served by the government.
d. All of the above.
11. Which of the following is common to both governments and not-for-profit
entities but distinguishes these entities from for-profit entities?
a. The budget is a legal, financial document.
b. Revenues are usually indicative of demand for goods or services.
c. There is direct matching of revenues and expenses.
d. There are no defined ownership interests.
Granof_8E_TestBank_ch01 Page 4
,12. Which of the following is NOT a purpose of external financial reporting by
governments?
a. Assess financial condition.
b. Compare actual results with the budget.
c. Assess the ability of elected officials to effectively manage people.
d. Evaluate efficiency and effectiveness.
13. Which of the following is NOT a typical external user of a government or not-
for-profit financial statements?
a. Governing boards
b. Securities and Exchange Commission
c. Donors and grantors
d. Taxpayers/citizens or organization members
14. Users of government financial statements should be interested in information
about compliance with laws and regulations for which of the following
reasons?
a. To determine if the government has complied with bond covenants.
b. To determine if the government has complied with taxing limitations.
c. To determine if the government has complied with donor restrictions on
the use of funds.
d. To determine all of the above.
15. Which of the following is NOT generally considered a main user of
government and not-for-profit entity external financial statements?
a. Investors and creditors.
b. Taxpayers.
c. Donors.
d. Internal managers.
16. Which of the following is a probable use an individual donor would make of
the external financial statements of a not-for-profit entity?
a. To determine the proportion of entity resources directed to programs
as opposed to fund-raising.
b. To determine the creditworthiness of the entity for investment
purposes.
c. To determine the salaries paid to all employees of the entity.
d. To determine the budget of the entity.
Granof_8E_TestBank_ch01 Page 5
,17. A regulatory agency would use the external financial statements of a local
government for which of the following purposes?
a. To ensure that the entity is spending and receiving resources in
accordance with laws, regulations or policies.
b. To determine how resources should be allocated.
c. To exercise general oversight responsibility.
d. To do all of the above.
18. A primary tool of both governments and not-for-profit to acquire funds to
finance long-term projects is
a. Levy of special purpose tax.
b. Have a city-wide gala.
c. Obtain line of credit on current assets.
d. Issue bonds to individuals and institutional investors.
19. Which of the following objectives is considered the cornerstone of financial
reporting by a state or local government?
a. Accountability.
b. Budgetary compliance.
c. Interperiod equity.
d. Service efforts and accomplishments.
20. Which of the following are objectives of financial reporting by state and local
governments as established by the GASB?
i. Accountability
ii. Evaluation of legislative results
iii. Level of service and ability to meet obligations
a. I only
b. II only
c. I and III
d. I, II and III
21. Which of the following is an objective of financial reporting by
nongovernmental not-for-profit entities as established by the FASB?
a. Assessing the types of services provided and the need for those
services.
b. Assessing the services provided and the entity’s ability to earn a profit.
c. Making rational decisions about the allocation of resources to those
organizations.
d. Assessing how managers have managed personnel.
Granof_8E_TestBank_ch01 Page 6
,22. As used by the GASB, interperiod equity refers to which of the following?
a. Demonstrate compliance with finance-related contractual
requirements.
b. Provide information to determine whether the constituents pay for what
they receive.
c. Demonstrate whether resources were obtained and used in
accordance with the government’s legally adopted budget.
d. Provide information to assist users in assessing the government’s
economy, efficiency, and effectiveness.
23. Given a specific set of data, the basis of accounting selected by or imposed
on a government will impact which of the following the LEAST?
a. Determining whether the government has a balanced budget.
b. Determining whether the government has the ability to issue debt.
c. Determining whether certain economic events occurred.
d. Determining the annual payments to a government-sponsored pension
plan.
24. The basis of accounting selected by or imposed on a government can
influence which of the following?
a. A decision to contract-out a specific service rather than provide that
service itself.
b. The amount of annual contribution to keep pension fully funded.
c. The amount that is available to spend on a donor-specified project or
service.
d. All of the above.
25. The Governmental Accounting Standards Board is the primary standard-
setting body for:
a. All governments.
b. All state and local governments.
c. All governments and all not-for-profit entities.
d. All state and local governments and all not-for-profit entities.
26. Under certain circumstances a government might use standards established
by which of the following standard-setting bodies?
a. GASB.
b. FASB.
c. AICPA.
d. All of the above.
Granof_8E_TestBank_ch01 Page 7
, 27. The primary standard-setting body for accounting and financial reporting by a
state-supported college or university is:
a. GASB.
b. FASB.
c. AICPA.
d. All of the above.
28. In descending order, the hierarchy of GAAP applicable to a church-owned
college may be:
a. FASB Statements and Interpretations, AICPA Accounting Research
Bulletins, Accounting Principles Board Opinion, FASB Technical
Bulletins, AICPA Industry Audit Guides, FASB Implementation Guides,
other accounting literature—including GASB standards.
b. FASB Statements and Interpretations, GASB standards, AICPA
Practice Bulletins (if cleared by FASB).
c. GASB Statements and Interpretations, AICPA Industry Audit Guides,
GASB Implementation Guides, other accounting literature—including
FASB standards.
d. GASB Statements and Interpretations, GASB Technical Bulletins,
AICPA Industry Audit Guides, AICPA Practice Bulletins (if cleared by
GASB), GASB Implementation Guides, other accounting literature—
including FASB standards.
29. Which of the following entities was a principal in creating the FASAB?
a. U.S. Congress.
b. Office of Management and Budget.
c. Governmental Accounting Standards Board.
d. Securities and Exchange Commission.
30. The purpose of the FASAB is to establish accounting standards for
a. Not-for-profit entities.
b. Federal government.
c. All governments.
d. Non-federal governments.
Granof_8E_TestBank_ch01 Page 8
Accounting Concepts and Practices, 8th Edition
by Michael H. Granof
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, Chapter 1
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
1. The objective of a typical government or not-for-profit entity includes goals
that are difficult to quantify
2. A government’s budget may be backed by the force of law.
3. Governments have no need for an accounting system.
4. A government’s constituants rely on general purpose financial statements for
a considerable amount of information about their government.
5. Governments and not-for-profit entities may never engage in business-type
activities.
6. Lenders use the financial statements of governments and not-for-profit
entities just as they would those of businesses, that is, to help assess the
borrower’s credit-worthiness.
7. Financial statements, no matter how prepared, do not directly affect the
economic worth of an entity.
8. The Federal Accounting Standards Advisory Board’s standards do not apply
to the federal Department of the Treasury.
9. Sarbanes-Oxley was passed in 2002 to enhance the independence of the
GASB.
10. The Governmental Accounting Standards Board establishes generally
accepted accounting principles for all state and local governments and all
not-for-profit entities.
Granof_8E_TestBank_ch01 Page 1
,ANSWERS TO TRUE/FALSE QUESTIONS (CHAPTER 1)
1. T
2. T
3. F
4. T
5. F
6. T
7. T
8. F
9. T
10. F
Granof_8E_TestBank_ch01 Page 2
,MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes governments from businesses is
a. The need to generate revenues equal to or more than
expenditures/expenses.
b. The importance of the budget in the governing process.
c. The need to provide goods or services.
d. The correlation between revenues generated and demand for goods or
services.
2. A primary characteristic that distinguishes government from not-for-profits is
a. The need to generate revenues equal to or more than
expenditures/expenses.
b. The ability to levy taxes.
c. The need to provide goods or services.
d. The correlation between revenues generated and demand for goods or
services.
3. Which of the following characteristics distinguishes a government or not-for-
profit entity from a business?
a. There is always a direct link between revenues generated and
expenditures/expenses incurred.
b. Capital assets are used to produce revenues and save costs.
c. Revenues are always indicative of demand for goods and services.
d. The mission of the entity may include goals other than maximizing
profit.
4. The most significant financial document provided by a government is the
a. Balance sheet.
b. Operating statement.
c. Operating budget.
d. Cash flow statement.
5. Which of the following statements is true?
a. Governments may engage in activities like activities engaged in by for-
profit entities.
b. There are a small number of different types of governments.
c. All governments engage in the same activities.
d. Managers may have a long-term focus and thereby sacrifice the short-
term liquidity of the entity.
Granof_8E_TestBank_ch01 Page 3
,6. Which of the following activities is NOT an activity in which a government
might engage?
a. Selling electric power.
b. Operating a golf course.
c. Operating a bookstore.
d. All of the above are activities that might be carried out by a
government.
7. In which of the following activities is a not-for-profit entity least likely to
engage?
a. Providing educational services.
b. Providing health-care services.
c. Providing for terrorism defense.
d. Retail sales of cookies
8. Which of the following can be affected by GAAP?
a. Legal ability to issue bonds.
b. Ability to balance the budget.
c. Amount reported as employee pension plan contributions.
d. Claims and judgments settled.
9. Which of the following characteristics is unique to governments?
a. The ability to have activities financed with tax-exempt debt.
b. The power to impose fees.
c. The ability to issue tax-exempt debt.
d. The ability to have activities financed by Federal grants.
10. To obtain a comprehensive understanding of a government’s fiscal health, a
financial analyst should obtain an understanding of which of the following?
a. All the resources owned by the government.
b. All the resources that may be summoned by the government.
c. Demographic data about the residents served by the government.
d. All of the above.
11. Which of the following is common to both governments and not-for-profit
entities but distinguishes these entities from for-profit entities?
a. The budget is a legal, financial document.
b. Revenues are usually indicative of demand for goods or services.
c. There is direct matching of revenues and expenses.
d. There are no defined ownership interests.
Granof_8E_TestBank_ch01 Page 4
,12. Which of the following is NOT a purpose of external financial reporting by
governments?
a. Assess financial condition.
b. Compare actual results with the budget.
c. Assess the ability of elected officials to effectively manage people.
d. Evaluate efficiency and effectiveness.
13. Which of the following is NOT a typical external user of a government or not-
for-profit financial statements?
a. Governing boards
b. Securities and Exchange Commission
c. Donors and grantors
d. Taxpayers/citizens or organization members
14. Users of government financial statements should be interested in information
about compliance with laws and regulations for which of the following
reasons?
a. To determine if the government has complied with bond covenants.
b. To determine if the government has complied with taxing limitations.
c. To determine if the government has complied with donor restrictions on
the use of funds.
d. To determine all of the above.
15. Which of the following is NOT generally considered a main user of
government and not-for-profit entity external financial statements?
a. Investors and creditors.
b. Taxpayers.
c. Donors.
d. Internal managers.
16. Which of the following is a probable use an individual donor would make of
the external financial statements of a not-for-profit entity?
a. To determine the proportion of entity resources directed to programs
as opposed to fund-raising.
b. To determine the creditworthiness of the entity for investment
purposes.
c. To determine the salaries paid to all employees of the entity.
d. To determine the budget of the entity.
Granof_8E_TestBank_ch01 Page 5
,17. A regulatory agency would use the external financial statements of a local
government for which of the following purposes?
a. To ensure that the entity is spending and receiving resources in
accordance with laws, regulations or policies.
b. To determine how resources should be allocated.
c. To exercise general oversight responsibility.
d. To do all of the above.
18. A primary tool of both governments and not-for-profit to acquire funds to
finance long-term projects is
a. Levy of special purpose tax.
b. Have a city-wide gala.
c. Obtain line of credit on current assets.
d. Issue bonds to individuals and institutional investors.
19. Which of the following objectives is considered the cornerstone of financial
reporting by a state or local government?
a. Accountability.
b. Budgetary compliance.
c. Interperiod equity.
d. Service efforts and accomplishments.
20. Which of the following are objectives of financial reporting by state and local
governments as established by the GASB?
i. Accountability
ii. Evaluation of legislative results
iii. Level of service and ability to meet obligations
a. I only
b. II only
c. I and III
d. I, II and III
21. Which of the following is an objective of financial reporting by
nongovernmental not-for-profit entities as established by the FASB?
a. Assessing the types of services provided and the need for those
services.
b. Assessing the services provided and the entity’s ability to earn a profit.
c. Making rational decisions about the allocation of resources to those
organizations.
d. Assessing how managers have managed personnel.
Granof_8E_TestBank_ch01 Page 6
,22. As used by the GASB, interperiod equity refers to which of the following?
a. Demonstrate compliance with finance-related contractual
requirements.
b. Provide information to determine whether the constituents pay for what
they receive.
c. Demonstrate whether resources were obtained and used in
accordance with the government’s legally adopted budget.
d. Provide information to assist users in assessing the government’s
economy, efficiency, and effectiveness.
23. Given a specific set of data, the basis of accounting selected by or imposed
on a government will impact which of the following the LEAST?
a. Determining whether the government has a balanced budget.
b. Determining whether the government has the ability to issue debt.
c. Determining whether certain economic events occurred.
d. Determining the annual payments to a government-sponsored pension
plan.
24. The basis of accounting selected by or imposed on a government can
influence which of the following?
a. A decision to contract-out a specific service rather than provide that
service itself.
b. The amount of annual contribution to keep pension fully funded.
c. The amount that is available to spend on a donor-specified project or
service.
d. All of the above.
25. The Governmental Accounting Standards Board is the primary standard-
setting body for:
a. All governments.
b. All state and local governments.
c. All governments and all not-for-profit entities.
d. All state and local governments and all not-for-profit entities.
26. Under certain circumstances a government might use standards established
by which of the following standard-setting bodies?
a. GASB.
b. FASB.
c. AICPA.
d. All of the above.
Granof_8E_TestBank_ch01 Page 7
, 27. The primary standard-setting body for accounting and financial reporting by a
state-supported college or university is:
a. GASB.
b. FASB.
c. AICPA.
d. All of the above.
28. In descending order, the hierarchy of GAAP applicable to a church-owned
college may be:
a. FASB Statements and Interpretations, AICPA Accounting Research
Bulletins, Accounting Principles Board Opinion, FASB Technical
Bulletins, AICPA Industry Audit Guides, FASB Implementation Guides,
other accounting literature—including GASB standards.
b. FASB Statements and Interpretations, GASB standards, AICPA
Practice Bulletins (if cleared by FASB).
c. GASB Statements and Interpretations, AICPA Industry Audit Guides,
GASB Implementation Guides, other accounting literature—including
FASB standards.
d. GASB Statements and Interpretations, GASB Technical Bulletins,
AICPA Industry Audit Guides, AICPA Practice Bulletins (if cleared by
GASB), GASB Implementation Guides, other accounting literature—
including FASB standards.
29. Which of the following entities was a principal in creating the FASAB?
a. U.S. Congress.
b. Office of Management and Budget.
c. Governmental Accounting Standards Board.
d. Securities and Exchange Commission.
30. The purpose of the FASAB is to establish accounting standards for
a. Not-for-profit entities.
b. Federal government.
c. All governments.
d. Non-federal governments.
Granof_8E_TestBank_ch01 Page 8
